The western sentinel. [volume] (Winston-Salem, N.C.) 1887-1926, 1887-11-03
Why MONEY Is SCARCE.

COSSTU6T On cAj NdtIObdl DtuhIlP
system, that explains in part why it is.
Notwithstanding that within the past
so days millions Of dollars have been
let loose from the National treasury,
the financial condition OF the country
is little bothered. Money is scarce,
scarcer than since the great panic in
1876, and, according to DR.. Battle,
both its scarcity and high rate of in
terest are directly chargeable to the
present banking system. He says:
a community like North Carolina
must send its currency to some mon
eyed centre, say New York city, buy
the bonds at a premium and obtain
only so per cent of their par value
thereof in notes. The community,
therefore, by the establishment of the
establishment of the bank, loses of
currency the 10 per cent margin and
also the premium on the bonds and
the amount Of reserve necessary to be
retained by the bank under the law.
A few years ago the establishment OF
a 100000 bank, caused to be sent. TO
New York $4,000 in currency, of
which it received $4,000 III return,
part OF which must be retained as re-
serve, leaving for lending purposes
about $4,000 less than was sent
away.
Owing to the rapid extinction of
the government debt, there being out
standing only the As of 1891, and the
As Of 1907, by reason Of which search
ty $1,000 per cent bond cost near
~ 81 300, the loss nov IS much great
er, amounting to nearly $4,000 cur
rency distracted from the community
IN which 100000 bank is located
'In this manner tie South and the
West have, in the aggregate, been de-
prived Of large amounts of money to
be accumulated in New York, the
chief benefits the bank comforting on
the community being collecting their
own money, partly capital, mainly
deposits, and lending the same at rates
Of interest so high as to throttle bust
ness enterprises. The South has suf
fered the most because by the results
of the war it started in 1865
almost denuded of all currency. As
the time approaches when the govern.
ment will exercise its right of paying
off the bonds at par, there will be in
trinsically constant yearly loss of
premium, so that many banks have
been paying off their notes, and issuing
no new notes.
[ contend that if the banks thould
be allowed to invest their capital in
legal tender coin, and to issue notes
not to exceed IN value three times the
amount of such coin, the amount in
excess Of the value of the coin to be
invested in negotiable paper running
not over three months, these desira BILE
ends would be attained.
To explain this l will give exam
pies:
"The three banks of Raleigh have
an aggregate capital of 1925, 000 At
present they issue only 100000. I'm
der the proposed plan they could issue
if the wants Of the business world
should require, up to $275,000. To
secure these notes the banks would
have coin, S425,000, and S850,O00 in
short time paper.
sThe banks of North Carolina had
in October, 1876, capital of 1885,
| 900, with circulation of $860,900.
Before 1861 they had circulation of
five or six millions. Under the pro-
posed plan their maximum circulation
would be S7,126,000. To reduce these
,,o+oc +Ia b,,Ive mould bcxo -, 80,
$2,376,000, and in short time bills
$4,752,000.
THE advantages of the proposed
plan are obvious:
"1st. The new currency would be
elastic-capable of expansion when
| business is buoyant and the demands
fer money are great, and it would con-
tract naturally when business is dull.
The volume would seldom be equal to
maximum. Many ofthe cid conser-
vative banks never reached the high
est limits, because eligible borrowers
were not found.
"2nd. The rate of interest would
fall, owing to the increased supply of
currency. Since 1866 banks in the
South have charged as high as Is to
| 30 per cent per annum interest. Itis
not at all wonderful that our farmers
and other business men have been
ruined With money at per cent
readily had, on the security of incom-
ing crops, they could pay cash for
their supplies and avoid the ruinous
losses of working on credit, paying for
| the usa of the eapitaI TINS obtained at
the rate of 80 to so per cent per an
mum.
"Can it be so provided that the
bank notes will have full credit
throughout the United States Can
they b8made as secure as the exist
ing bank notes?
Il think these questions may be
answered afirmatively.
Two plans suggest themselves for
the accomplishment of this result:
/ "1st. Substitute for the existing
system a great "Bank of the United
States" with its branches in all the
States like the Bank of France with
its departmental branches. Against
such an institution there is plainly a
deep seated prejudice, which has de-
scended from the Jackson deadly fight
with the second Bank ofthe United
States )" but there seems to be no
reasonable ground for concluding
that another institution Ia our day
would necessarily be ,,unsound or IN
fortunate. The Bank of France has
been eminently successful for years,
/ 4 II r. ~ II X